When Fraud Is Certified Kosher

After a Haredi developer appealed a rabbinical court ruling to a state court, the judge focused not on the rabbis' findings, but on the fact that they had turned a blind eye to a blatantly illegal agreement.

Had they not been so greedy, the ultra-Orthodox real estate developers Aharon Eisenberg and Avraham Tzeinwirt could quite possibly have been benefiting today - one from a large sum of money promised in return for withdrawing his bid on a parcel of land at the last minute, the other from the building he could have constructed on that land for a sizable profit. The parcel in question, located in downtown Jerusalem, was sold by the Jewish Agency.

Bnei Brak’s ultra-Orthodox rabbinical court.Tomer Appelbaum

But Tzeinwirt, the winner of the tender, reneged on the shady deal he'd signed with Eisenberg and refused to pay him the sum he'd promised in return for the latter's withdrawal from the tender.

Throughout the three years that have elapsed since then, the two men have continued to fight over the money. They first applied for arbitration to an ultra-Orthodox rabbinical court (known in Hebrew as a "Badatz" ), which ruled that Tzeinwirt had to pay. But Tzeinwirt refused and in an unusual step applied to the Tel Aviv District Court, which then reversed the arbitration ruling. Now the entire deal is liable to be canceled.

Tel Aviv District Court Judge Michal Agmon-Gonen harshly criticized the ultra-Orthodox rabbinical court in Bnai Brak - which is headed by Rabbi Nissim Karelitz and operates outside of the state's judicial system - ruling that this court had validated an illegal agreement, the aim of which was to defraud the Jewish Agency and the Tax Authority. As the deliberations at the rabbinical court are not open to the public, the judge relied to a large extent on the testimony provided by the litigators themselves.

The revocation of an arbitration ruling handed down by an ultra-Orthodox rabbinical court is highly unusual. According to Haredi jurists and wheeler-dealers, the public courts are not usually eager to intervene in the private rabbinical courts' arbitration rulings, regarding them as internal matters best settled within the community.

In this case, however, Agmon-Gonen revoked the arbitration ruling because it violates public policy - and in so doing also spoke her mind about the Haredi court's tendency to turn a blind eye. In her ruling, the judge wrote that "the the two sides explained clearly to the arbitrators [at the rabbinical court] the motivation for the agreement in this way: "Why should the money go to the [Jewish] Agency, those eaters of animal carcasses and unclean food, rather than remain with us?" (The quotation is from the arbitration proceedings )."

The legal department of the Jewish Agency, which issued the tender, says they are studying the details of the case and will then decide how to act.

"The partners' intension to defraud the tax authorities was also explained to the arbitrators in no uncertain terms," the judge continued, quoting from respondent Tzeinwirt's brief. "It was explicitly agreed that [Tzeinwirt] would transfer to Mr. Eisenberg the sum of $1.15 million, but it occurred to neither of them that it would be necessary to deduct from this amount tens of percentage points for the authorities and the regime of the Zionist state."

Agmon-Gonen's summation further states: "After what the two sides said in the arbitration, including their explicit acknowledgment that it was an illegal agreement, they would have done well had they not brought this agreement into the court. The submission to the court of the briefs by the parties in the arbitration - in which both sides make it clear this concerns an illegal agreement, the aim of which is to defraud the Jewish Agency - constitutes insolence. In any event, once it became clear that the arbitrators, despite being aware that a blatantly illegal agreement was in question, gave it validity, there was no alternative but to revoke the arbitration ruling."

The judge also ordered that the ruling be sent to the attorney general, the Justice Ministry, the Jewish Agency and the Antitrust Authority to examine the possibility of indicting the sides involved in the deal.

'The conditions of arbitration'

The director of the Bnai Brak rabbinical court, Rabbi Shmuel Karelitz, told Haaretz that the court opposes illegal or improper deeds of any sort. Regarding the arbitration between Tzeinwirt and Eisenberg, Shmuel Karelitz said: "The attitude toward and agreement between two sides in which improper actions are involved is a complex question ... on which it is possible to arrive at various outcomes. Deciding to revoke an agreement of this sort means creating another injustice, in addition to the injustice already caused, and rewarding the party who caused the injustice. During the course of the arbitration, when the facts were discovered, the arbitrators considered ... stopping the arbitration and perhaps this should have been done."

According to him, the rabbinical court judges expressed unease about the "improper acts revealed to them during the course of the arbitration," but this was not recorded in the protocols "because the rabbinical court does not explain its rulings ... as part of its method of working. This is one of the conditions of arbitration."

Several dozen rabbinical courts that are not under the purview of Israeli law operate within the Haredi world; Karelitz's is among the foremost. Its status and power derive from its monopoly on disagreements within the community, especially those concerning financial matters. The ultra-Orthodox, who see themselves as obligated to Jewish rabbinical law only, conduct their legal matters almost exclusively in these private courts.

Rabbi Karelitz, who is one of the most important rabbis in Bnai Brak, no longer sits on the bench because of his advanced age, but about 40 other rabbinical judges work in the building, headed by Rabbi Yehuda Silman. The court convenes every evening and deliberates on about 1,000 disputes annually. This court also serves as an arbitration institution for the entire ultra-Orthodox community.

'An open secret'

The agreement between Eisenberg and Tzeinwirt was drawn up in 2007, when the two were competing to purchase land in the Geula neighborhood of Jerusalem. The District Court found that on the eve of the final pricing among the highest bidders, the two had agreed between themselves that Eisenberg would pull out of the tender in return for $1.15 million.

However there is no documentation of such an agreement, and after Tzeinwirt won the tender he fobbed off the demand to pay. Eisenberg turned to the rabbinical court, which ruled in his favor. Had Tzeinwirt not applied to the Tel Aviv District Court to revoke the arbitration ruling, it is doubtful the deliberations in Rabbi Karelitz's court - which are conducted in absolute secrecy - would have come to light.

Tzeinwirt, however, feeling he had been discriminated against, was determined to overturn the ruling - even at the price of exposing the fraud and the risk that he'd be called to account for doing so.

Relying on the minutes Tzeinwirt had submitted from the private deliberations, the District Court ruled that the three rabbinical judges who'd presided in the arbitration - Rabbi Silman at their head, Rabbi Eliezer Farbstein and Rabbi Yaakov Cohen - knew that the deal between the two parties was not legitimate.

Details from the deliberations are also revealed in Eisenberg's reply to the court, intended for ultra-Orthodox ears only: "It is an open secret that someone who carries out a deal, the legality of which is in doubt, tries to avoid any possibility of exposure to the rule of law. For this simple reason, this deal involving collusion on tender, which is a criminal offense, and particularly in the existing circumstances ... was concealed from all the legal authorities and as a secret agreement deposited in trust, so that neither of the sides has a copy of it. Moreover, there is an explicit commitment by the sides to keep the fact of the agreement a total secret and therefore it would not only be mendacious but also ridiculous to try to argue that a tax receipt should be issued in return for payment ..."

At the District Court, the transcript of these rabbinical court deliberations, held in November 2007, was placed in evidence. In it, Yohanan Weitzman, who represented Eisenberg, said: "The sides have admitted the agreement is not real and is a fiction, in case it should come into the court." Feinstein: "A fiction doesn't need to be signed." Weitzman: "In a case when an agreement is not valid from the legal perspective, it is drawn up regarding a different apartment in order to use it in court."

Later Judge Farbstein again observes: "It is criminal to bring this to a court."

But there is not a single word of criticism against the fraud itself.

Silman does not grant interviews to the secular press, but his wife said on his behalf: "My husband is a man for whom honesty is a light unto his feet. At the court, too, they know that Rabbi Karelitz's court is involved in nothing mendacious."

To the question of why he deliberated on the case at all if he knew fraud was involved, she replied: "There are things among us that aren't exactly in accordance with state law, and it is hard to explain this to a secular mind. [The rabbinical judges] apparently understood this wasn't something illegal according to the Torah."

Attorney Mordechai Baicz, who represents Aharon Eisenberg, says: "We argued that the arbitration ruling does not violate public policy, but the court ruling dealt more with beliefs and opinions of the rabbinical judges and the litigators."

A growing trend

Tzeinwirt is not the first to have exposed what happens in Karelitz's court, and apparently won't be the last. According to an ultra-Orthodox journalist who preferred not to be identified by name, "Rabbi Karelitz's court is big and therefore a lot of people go through it. It is also relatively stringent in its rulings... Some charge that elements in the rabbinical court bring in the internal politics among the Hasidic courts and the streams, and stir up quarrels."

In recent years, an increasing number of Haredim have been applying to the state courts to appeal rulings by the ultra-Orthodox courts, something that was not seen in the past.

One involves the case of building contractor Zvi Bialostotzky, who sued eight rabbinical judges from Karelitz court's in the Magistrate's Court for threatening harassment. Bialostotzky, a Gur Hasid and a real estate developer, is a colorful character. "He created a huge mess for them," says the ultra-Orthodox journalist. "They launched a frontal attack against him. Not because he was the first to sue them, but because they are aware of his strength."

So will Tzeinwirt pay a personal price for turning to the state court system? Despite his strength, Bialostotzky's grandchildren were expelled from the educational institutions and he was denounced.

"The bottom line is that Bialostotzky made personal attacks, and this hurt the rabbinical court judges' status," says the journalist.

Tzeinwirt is a senior partner in Glatt-Of, the largest provider of poultry products to the ultra-Orthodox sector, and the prevailing opinion is that it will be difficult to inflict punishment on him or rescind the company's kashrut certification. If he is punished, it will be for exposing one of the most closely guarded secrets of the Haredi community, not for defrauding the authorities.

"In our eyes, as long as it isn't a matter of robbery in broad daylight, it isn't really kosher, but it's possible to look the other way," says the journalist. "This case is merely about the regulations for tenders - a gray area that doesn't violate rabbinical law. According to rabbinical law, stealing means taking from a specific individual, and if there isn't an individual who is being taken from, and maybe profit is being kept from a public body, it's seen as a more legitimate matter."

He also says it is not the arbitrator's role to enforce the laws of the state. According to him, "On the one hand, with respect to certain issues, there is a lot more cooperation nowadays with the state. But tax evasion still has legitimacy among the public. The feeling is that, in any case, we are discriminated against. We don't have community centers and swimming pools here and we don't get sufficient municipal services - so in some way, they aren't giving me anything directly and therefore I am justified in not paying taxes."

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